5 Markets Beating the Housing Bust

As home prices in most of the nation languish, these cities are back above pre-bust levels.

Stocks aren't the only investments returning to pre-downturn levels. In some cities, home prices have recovered and in some cases even surpassed 2008 levels.

Existing home sales rose 4.3% in January from a month earlier to a seasonally adjusted annual rate of 4.57 million -- the highest level since May 2010 -- according to data released this morning by the National Association of Realtors. While experts say it's an encouraging sign, they also point out that home prices are down in most places. According to NAR data through 2011, the median home sales price in the U.S. is still off about 15% from 2008.

But some markets are bucking the trend, with homes selling for as much as 18% more than they were before the market meltdown. The greatest growth occurred in relatively small cities that weren't involved in the housing boom and therefore have avoided much of the housing bust, says Stuart Gabriel, director of the Ziman Center for Real Estate at the University of California. Indeed, sales prices in these areas -- which include the Buffalo-Niagara Falls metropolitan area in upstate New York and the Davenport-Moline-Rock Island region that spreads across Iowa and Illinois -- remain well below the 2011 national median of $166,100.

To be sure, in some cases median sales prices could be rising not because typical home values are growing in that area but because more buyers are purchasing larger, pricier homes there than in the past, says H. Pike Oliver, senior lecturer at Cornell University's Department of City and Regional Planning. He says that's likely the case if higher-paying jobs recently moved into the area.

Still, homeowners in these metro areas who've been considering selling could see a handsome return on their real estate -- and that includes consumers who bought homes just a few years ago. Someone who purchased a house in Elmira, N.Y. in 2008 -- when the median sales price was $87,700 -- could have pocketed an 18% return if they sold it by the end of last year when the median sales price was $103,400, according to regional data from NAR. In Louisiana's Shreveport-Bossier City area, median sales prices are up 13% over that period to $156,200.

Here are the five metro areas where median home prices have risen the most since 2008.

Located in western New York near Pennsylvania, Elmira makes this list largely because it boasts among the lowest foreclosure rates in the country. Less than 0.1% of homes -- or 23 in total -- received foreclosure filings in 2011, compared to about 1.5% of homes in the U.S., according to RealtyTrac.com, which tracks foreclosure data. Since the foreclosure crisis picked up in 2008, fewer than 200 homes received foreclosure filings in this city through the end of last year. In 2010, while 2.2% homes in the country received foreclosure notices, just 0.1% in Elmira did. This alone helped keep home values from plummeting, experts say.

Elmira is also fortunate to have missed out on the building frenzy that helped spur the housing bubble never, says Oliver. "Overbuilding didn't happen," he says. And for the most part, median sales prices for existing homes rose over the past decade. For a home seller in this area, the returns could be big: Someone who purchased a home in the city in 2000 would have paid a median price of $72,100, according to the NAR, and could get a 43% return on that home based on the 2011 median sales price of $103,400 in the city.

The lack of both foreclosures and oversupply of new buildings have helped real estate prices in this market that borders the Mississippi River, says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla. "We're not a rollercoaster ride here in the Midwest," says Kim Wilkins, realtor in the Davenport office of Ruhl & Ruhl Realtors. "We don't go up as much in the good times or down as much in the bad times."

But it's the jobs market that has helped real estate prices here the most. Though unemployment isn't low in Davenport, it's remained below the national average. And that relatively healthy job market coupled with affordable real estate has brought in more young, first-time home buyers to the metro area, says Wilkins, and that's resulted in homes priced in the $200,000 range and under selling the best. He says a bulk of the buyers have been professionals who moved into the area over the past few years to work at the machinery manufacturer John Deere headquarters in Moline, the Rock Island Arsenal military facility, and hospitals in the area. Also, last year Alcoa announced it would invest around $300 million in Davenport to expand its plant there in response to growing car demand.

Like most of upstate New York, the Buffalo-Niagara Falls area didn't experience overbuilding or rapid home price acceleration, which sheltered it from much of the housing downturn, says McCabe. Separately, foreclosures have stayed way below the national level since the housing crisis picked up. Between 2008 and 2011, about 0.1% to 0.7% of the metro area's homes received foreclosure notices compared to roughly 1.8% and 2.2% of homes on a national level, according to RealtyTrac.com.

Beyond housing, Buffalo's economy also helped home prices. Though the city's economy spent years in decline, Buffalo's recovery has been one of the strongest in the state, and its job growth outpaced the country, according to a September 2011 Moody's report. The city boasts a new medical campus and an expanding medical sector that includes highly paid research positions. (Such positions could be impacting the median price if those employees are purchasing higher-end homes, says Oliver.) The city could also be benefiting from manufacturing jobs, including the 2010 reopening of the nearby General Motors plant.

It's all about jobs in Shreveport in northwestern Louisiana, which experienced mild unemployment -- at least when compared to the rest of the country. The metro area's jobless rate was 5.9% in December 2011, compared to the country's 8.5% rate that same month, according to the BLS. In 2009 and 2010, the city's unemployment rate stood at 7%, while the national average was near 10%. The energy industry -- in particular oil and gas -- is among the bigger employers in this area, says McCabe, and when the sector picks up the local economy tends to move along with it.

Meanwhile, median prices in this area have been rising since 1999, according to NAR data. That stability along with a strong jobs market has kept buyer demand for homes steady, says Barry Rachal, broker and owner of RE/MAX Executive Realty that sells real estate in Shreveport-Bossier.

A declining number of homes on the market could be helping home prices. That's because when there are fewer homes on the market, buyers have less room to negotiate on lowering the price. Home listings this month were down 14% compared to February 2011 to nearly 11,400, according to data through Feb. 20 from the Department of Numbers, which tracks home inventory in major U.S. cities.

But unlike the other cities on this list, the foreclosure rate in Indianapolis surpassed national levels: In 2010, 2.6% of homes in the metro area received foreclosure notices, compared to 2.2% in the U.S., according to RealtyTrac.com.

The city's economy could be helping to offset the impact of those foreclosures on home prices. Manufacturing and biotech sectors are expanding and hiring, says McCabe. And the city's low crime rate and relatively affordable cost of living make it a desirable area for midwestern families to move to, he says. That might be why median sales prices of existing homes have been steadily growing since 2008.